QBE, like many top-tier insurers, has grown largely through acquisition. While that strategy has helped the company establish footholds in markets around the globe, it’s also led to various businesses operating parallel to one another, rather than truly working together.

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“The business I inherited is very different from what my predecessor inherited five years ago,” said newly-minted CEO Pat Regan. “The separate businesses were operating the way they had been pre-acquisition. We want to integrate our operations so we’re recognizable as a unified QBE no matter where we are in the world.”

Since taking the helm as CEO of QBE Group in January after a rough 2017, Regan has lead the company’s strategy of simplification, which entailed divesting some smaller business units in the Asia market and exiting Latin America altogether, while reshaping the company as an integrated specialist insurer in the North American market.

“North America has been the home for our core programs for the past few years, which include crop, programs, and commercial specialty along with commercial P&C. Altogether, they represent a $5 billion business in North America. We’re especially focused on growing our specialty business for the middle market, which we’ve built up to almost a $1 billion business over the past five years,” Regan said.

Regan sat down with R&I to discuss his plans for streamlining the company and growing its North American specialty arm — and the challenges that lie in his path.

R&I:How do you plan to grow the specialty business in North America?

Pat Regan: Our core businesses have previously been run very separately, but many clients need coverages that overlap, so we’re integrating those units to better leverage our underwriting talent and data, and ultimately better service claims.

It’s not just about doing the basics, but doing them brilliantly.

We’ve hired talented teams of underwriters with expertise in specialty lines, whether that’s D&O, aviation, marine, etc., and the business comes with them. We’ve grown organically on the back of strong underwriting talent, and that’s our growth strategy going forward. We want to continue to be magnet for talent.

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The other piece of that is investing in innovation. Technology is changing the way we do business, and we have to harness all of the data and tools that are out there to support and augment what our underwriters do.

Streamlining internally can also help us achieve a more competitive expense ratio, which we need to improve in order to thrive in this market. It’s a very competitive market, so we have to be good at what we’re doing. Ultimately, I want our hallmark to be that were as good as we possibly can be in what we call the “brilliant basics.”

R&I:What are the brilliant basics?

PR: Underwriting, pricing and claims. We have to be better at understanding and accurately pricing risks and more thoughtful about selecting which ones we want to take on our portfolio. After heavy natural catastrophe losses in 2017 and underwhelming performances in some emerging markets, along with continuing soft market conditions, it’s more important than ever to maintain our underwriting discipline and build long-lasting relationship with our clients and broker partners.

Pat Regan, CEO, QBE Group

To do that, we have to be the best. I’m going to be a zealot on this. It’s not just about doing the basics, but doing them brilliantly. And the definition of “brilliant” will change every day, because our world is evolving so quickly.

R&I:How does QBE invest in innovation and stay up to speed with new tech?

PR: None of us can innovate as fast as we’d like to. It’s just the nature of being a pre-existing, highly regulated insurance company. But we do have a few wheels in motion.

We are investing in some Insurtech startups. We launched QBE Ventures, our venture capital arm, about a year, through which we’re making small investments or buying minority stakes in different tech companies. We’re dipping our toe in. There are lots of ideas out there, and we want to make sure we have a full view of what’s going on. Usually they’ll take our data to improve their own processes, and then we’ll try to adopt their processes to improve our workflows.

Ultimately, we all have to relearn how we do our jobs in this new environment. We have to challenge the way we do things. There are tons of opportunities, but we can’t do it all ourselves – hence the need for investment in partnerships.

We have a separate internal arm called QBE Labs, where we’re experimenting with lots of different ideas and innovations, but keeping it separate from the mothership.

Over the last few years, we’ve invested a lot of money into drone technology and data science, which we’ve been applying heavily to our crop business. If you’re providing crop insurance, you try to pick farmers who’ve had consistently good yields, and there’s tons of data behind that. We’re using drones a lot to survey farms with huge acreage.

R&I:Where can digitization and Insurtech solutions bring the most value for the industry?

PR: As an industry, we’re still so manual, so the biggest benefit is in digitizing our processes. Take for example the exchange of information between client, broker and carrier. Everything is on paper. Collecting that data digitally would be a boon for productivity and could cut potential down on human error.

Data can also provide a more granular view of risk and help underwriters price risk more accurately. Machine learning algorithms could help us collect and categorize information more efficiently.

Again, this would augment what our underwriters do, not replace them.

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The biggest area of early wins has been in claims. We can apply predictive analytics to help detect fraud and direct the right level of resources and expertise where it’s needed.

Ultimately, we all have to relearn how we do our jobs in this new environment. We have to challenge the way we do things. There are tons of opportunities, but we can’t do it all ourselves – hence the need for investment in partnerships.

R&I: As CEO of a global company, you do a lot of traveling. What’s your favorite city?

PR: I like them all — Sydney, Hong Kong, London, Paris, New York, Singapore — they all have their own flavor. I never imagined I’d get to do a job that lets me travel the world. For more than a decade now, I’ve taken my family to Santa Monica, California every year, so I am partial to California.

The biggest challenge with so much travel is not knowing what the weather will be. I never seem to have a coat when I need one. &

Katie Dwyer is an associate editor at Risk & Insurance®. She can be reached at [email protected]

How quickly do you want that package you ordered today? Would you rather have it tomorrow, or a week from now?

According to the National Retail Federation, nearly 40 percent of online shoppers expect free two-day delivery, which is no surprise considering the appeal of online shopping lies in its convenience and speed.

But these expectations increase the pressure on wholesale distributors to shorten last-mile delivery timelines. Where warehousing was once a mechanism to store inventory at low cost, it’s now becoming a way to keep products closer to consumers to cut down on delivery lead times and costs.

“This is where urban warehouses come into play,” said Mark Morneau, Senior Vice President and General Manager, National Insurance, East Division, Liberty Mutual Insurance. “By moving into cities and getting products closer to where consumers live, they eliminate some delivery lead time and expense.”

Warehouses in densely-populated areas, however, come with unique risks that suburban or rural warehouses don’t typically need to manage. As wholesale distributors increasingly turn to urban warehousing to meet the demands of e-commerce, risk managers should be aware of these key risks and challenges:

1. Older Properties in Densely-Packed Neighborhoods

Warehousing in an urban setting typically means moving into an older and smaller building than what would be available further outside city limits, which presents many challenges.

“Oftentimes the buildings used are old manufacturing facilities that aren’t designed for extensive storage. So, they need to be brought up to standards suitable for housing products for wholesale distribution,” Morneau said.

That means retrofitting them with standard and code-compliant sprinkler, ventilation, electrical, and alarm systems and reconfiguring the space to properly store and move inventory, which could include raising ceilings, adding racks, and widening loading docks.

“Being much closer to your neighbors also presents risks,” Morneau said. “In densely populated areas, a fire that starts three buildings down can still take out your facility. Older water systems may not supply sufficient water pressure for fire sprinkler systems, so fire pumps may also need to be installed.”

While infrequent, fires can result in total loss without the proper safeguards. Clear emergency response and recovery plans can help mitigate the damage.

2. Premises Security

Fully-stocked warehouses make an attractive target for thieves.

“Urban environments mean more people, which means more potential for crime,” Morneau said. “The logistical realities of urban warehousing also make it more difficult to keep crime out.”

Concentrated areas mean less space for fences and other barriers that limit access. Narrow roadways necessitate smaller delivery trucks which will have to enter and exit the facility more frequently, increasing the opportunities for vandals or thieves to gain entry.

“Your inventory is a critical asset and must be well-secured,” Morneau said.

Around-the-clock security guards and security equipment that includes video surveillance can help to deter thieves, while protocols dictating who can enter the facility and when can help to limit opportunities for criminals.

3. Workforce Safety in Confined Spaces

The tighter floorplans of urban facilities also present safety risks to employees.

“Older facilities with less space won’t have as much automation, which means workers are doing more material handling. That alone increases injury risk,” Morneau said. “Employees are also likely to interface more with forklifts and other machinery, which are also operating in more confined spaces. Whenever people work near this type of machinery, the risk of bodily injury goes up.”

Investing in equipment like conveyer belts and elevators to streamline workflows can help mitigate that risk. Whatever changes are made, thorough safety training for employees is paramount.

4. City Fleet Operations

“A benefit of being in an urban warehouse is access to highways and roads, but larger vehicles can’t navigate as easily in a city environment. With more people, vehicles, and distractions on the part of both pedestrians and drivers today, accidents become much more likely,” Morneau said.

The pressure to meet quick delivery timelines could also lead to overscheduling drivers. Not only could this run afoul of regulations, but it can also lead to driver fatigue and a greater likelihood of accidents.

“Warehouse managers need to determine if they can operate effectively with their current fleet and should also consider city ordinances that may limit hours of business operation or affect parking,” Morneau said.

Distributors may also choose to outsource delivery rather than manage their own fleets. In cities, new sharing economy platforms are taking up this task along with traditional players. But farming out delivery to the sharing economy comes with its own liability challenges.

5. Relying on the Sharing Economy for Delivery

The sharing economy is introducing opportunities for businesses of all types to offer better, faster, and more cost-effective service, and the wholesale sector is no exception.

Wholesalers are finding available vehicles and drivers to deliver inventory to client locations via online transportation marketplaces. In the future, gig workers using their own cars and bikes as delivery vehicles could even help wholesalers get packages directly to consumers’ doorsteps. While these services can help expand distribution operations, they can also introduce general liability risks.

“Risk managers may be exposing their companies to a host of emerging liability issues by using sharing economy platforms because the drivers and fleets are relatively unknown,” Morneau said. “A third party is responsible for verifying drivers and their credentials, backgrounds, and vehicles, but you are trusting them to make deliveries. It’s a much harder situation to control.”

These relationships can offer the benefits of speed, efficiency, and capacity, but contracts with third-party platforms should outline service expectations and clearly delineate which party assumes liability.

Access Risk Management Resources and Comprehensive Coverage

Wholesale distributors are already making use of multistory urban warehouses in Europe and Asia, with a few cropping up in U.S. hubs like San Francisco and New York. The trend is likely to continue as e-commerce keeps growing and consumers keep expecting speedy delivery.

Risk managers can best plan and prepare for the unique exposures associated with urban warehouses by working with well-resourced insurers. Liberty Mutual’s risk control consultants can assess property, safety, and fleet risks and recommend strategies to mitigate them, such as developing a fleet safety program, evaluating a new or existing fire protection system, or reviewing an emergency response plan.

“Our risk control team helps risk managers identify the exposures they’ve overlooked so they can bring down their residual risk and focus on operating their businesses profitably,” Morneau said.

Along with core primary property and casualty products, Liberty Mutual also offers specialty coverages like environmental, cyber, and professional policies through Ironshore, a Liberty Mutual company.

“We have the full suite of products to address urban warehousing exposures and help distributors take advantage of these opportunities,” Morneau said.

This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with Liberty Mutual Insurance. The editorial staff of Risk & Insurance had no role in its preparation.

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